Economy

Union Government notifies merger of FMC with SEBI

Union Government has notified the merger of commodities market regulator Forward Markets Commission (FMC) with Securities Exchange Board of India (SEBI) with an effect from 28 September 2015.

In this regard, Union Finance Ministry has issued a notification mentioning that

  • Regulation of Commodity Derivatives Market will shift to SEBI under Securities Contracts Regulation Act (SCRA) 1956.
  • Forward Contracts Regulation Act (FCRA), 1952 gets repealed so does the FMC cease to exist.

With this merger, all three national and six regional commodity exchanges will come under the ambit of national capital market regulator SEBI.

Implication: This merger will create a unified regulator for commodities and capital markets which in turn will help streamline monitoring of commodity futures trading and curb wild speculations in the market.

Background

  • Union Finance Minister Arun Jaitley in his Budget speech of February 2015 had announced the merger of FMC with the capital market regulator SEBI in order to strengthen the regulation of commodity futures market.
  • The Financial Sector Legislative Reforms Commission (FSLRC) also had recommended merger of SEBI, IRDA, FMC and PFRDA into a single entity called Unified Financial Agency (UFA).

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Union Cabinet approves MFP for Development of Hydrocarbon discoveries

Union Cabinet has approved Marginal Fields Policy (MFP) for the development of unexploited hydrocarbon discoveries by state owned oil companies.

Decision in this regard was taken by Union Cabinet Meeting chaired by Prime Minister Narendra Modi in New Delhi.

Key facts about Marginal Fields Policy (MFP)

  • 69 unexploited oil fields owned by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will be opened for competitive bidding based on revenue sharing model.
  • These discoveries for many years were not able to monetize due to isolated locations, small size of reserves, technological constraints, high development costs and fiscal regime.
  • These discovered oil fields were considered as marginal fields as they were not developed and thus were of lower priority.
  • Private exploration companies will be able to submit bids for exploiting these oil fields.
  • The policy allows the successful bidder to sell these oil fields at the prevailing market price of gas, rather than at an administered price.

It should be noted that this is first time revenue sharing model introduced in oil sector.

Implication: This decision is expected to stimulate investment in oil exploration sector as well as increase domestic oil and gas production. It will also help in monetizing 70,000 crore rupees worth of resources form these unexploited oil fields

Earlier Methodology: The earlier exploration contracts were based on the concept of profit sharing model. Under this method it had become necessary for the government to scrutinize cost details of private participants which had resulted in delays and disputes.

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Canada’s economy falls into a recession

Canada’s economy has fallen into a recession for first time after global financial crisis of 2009.

Statistics Canada, nodal national statistical agency of Canada has reported that its economy i.e. Gross Domestic Product (GDP) has retreated at an annual pace of 0.5 per cent from April through June 2015.

In earlier quarter first three months of the year 2015, the economic slowdown had appeared which had felled to 0.8 per cent. Technically, two consecutive negative quarters leads to recession.

In recent situation, Canada was dragged into the economic to slow down due to external pressure of falling oil prices and economic troubles in China. In an effort to revive the economy, Bank of Canada had cut interest rates twice in year 2015.

Canada is the world’s 11th-biggest economy and the United States’ (US) biggest trading partner. The last time in 2008-09, Canada was in recession after the US housing market meltdown had triggered a global credit crisis. But, Canadian economy suffered far less damage from the financial crisis and great Recession compared to its southern neighbour.

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